Dear Savvy Senior: My income dropped way off when I retired early last year, and I'm wondering if I fall into the so called "47 percent" of Americans who won't have to pay any income taxes this year. What can you tell me?
Dear Curious: The percentage of seniors, age 65 and older, who won't have to pay income taxes this year, is actually around 56 percent according the Tax Policy Center. Here's a breakdown of the 2012 filing requirements along with a few other tax tips to help you determine if you need to file.
Whether or not you'll need to file a federal income tax return this year will depend on your filing status, your age and your gross income. If your gross income falls below the IRS filing limits, you probably won't have to file. Gross income includes all the income you receive that is not exempt from tax, not including Social Security benefits, unless you are married and filing separately. You probably don't have to file this year if:
• You are single and your 2012 gross income was less than $9,750 ($11,200 if you're 65 or older).
• You are married filing jointly and your gross income was under $19,500. If you or your spouse is 65 or older, the limit increases to $20,650. And if you're both over 65, your income must be under $21,800 to not file.
• You are head of household and your gross income was below $12,500 ($13,950 if age 65 or older).
• You are married filing separately and your income was less than $3,800.
• You are a qualifying widow(er) with a dependent child and your gross income was less than $15,700 ($16,850 if age 65 or older).
Be aware that there are some special financial situations that require you to file a tax return, even if your gross income falls below the IRS filing requirement. For example, if you had net earnings from self-employment in 2012 of $400 or more, or if you owe any special taxes to the IRS such as alternative minimum tax or IRA tax penalties, you'll probably need to file.
To figure this out, the IRS offers a resource on their website called "Do I Need to File a Tax Return?" that asks a series of questions that will help you determine if you're required to file, or if you should file because you're due a refund. You can also get help over the phone by calling the IRS helpline at 800-829-1040.
Check Your State
Even if you're not required to file a federal tax return this year, it doesn't necessarily mean you're also excused from filing state income taxes. Check on that with your state tax agency before concluding you're entirely in the clear. For links to state and local tax agencies see taxadmin.org - click on "Links."
If you do need to file a tax return this year, you can get help through the Tax Counseling for the Elderly (or TCE) program. Sponsored by the IRS, TEC provides free tax preparation and counseling to middle and low income taxpayers, age 60 and older. Call 800-906-9887 to locate a service near you.
Also check with AARP, a participant in the TCE program that provides free tax preparation at nearly 6,000 sites nationwide. To locate an AARP Tax-Aide site call 888-227-7669 or visit aarp.org/findtaxhelp.
Send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070, or visit SavvySenior.org. Jim Miller is a contributor to the NBC Today show and author of "The Savvy Senior" book.
Discard the records you no longer need: Tax returns older than seven years; bank records and credit card statements that are not related to the tax returns you're keeping; brokerage statements that aren't related to purchases of current holdings. Be sure to shred all your old documents before throwing them out.
Convert the documents you plan to save into digital images that are stored on your hard drive. Invest in a good scanner and scan as you go through your paperwork, shredding and tossing the hard copies as you go. On your computer, file by tax year so your 2011 folder will contain your tax return for 2011 and all pertinent bank records and receipts. Organize the previous six years the same way. Next year you can delete the oldest folder when you add the 2012 folder.
All of the financial institutions you deal with would prefer to send your statements electronically. Stop receiving paper statements. Instead, download your statements electronically and store them in your new filing system. Most banks and credit card companies keep at least a year's worth of statements available. You need to download these files only once a year to complete the year's file.
Make backup copies of your files on a CD. Choose a CD-R (recordable) as opposed to a CD-RW (rewriteable), because a CD-R cannot accidentally be overwritten. Depending on your computer operating system, you may be able to continue adding data to a CD-R each year until the CD is full. However, some operating systems won't allow that, so you'll need a new CD for each year.
Your new electronic filing system can be expanded to include all your financial records, from car maintenance receipts to pay stubs. Wills and insurance policies can also be scanned and stored but, of course, keep the originals of those in a safe deposit box or fireproof safe.